A Causal View of the Role and Potential Limitations of Capitation in Promoting Whole Health System Performance

David Bruce Matchar, Wei Xuan Lai (), Ashish Kumar, John Pastor Ansah and Yeuk Fan Ng
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David Bruce Matchar: Program in Health Services and Systems Research, Duke-NUS Medical School, Singapore 169857, Singapore
Wei Xuan Lai: Program in Health Services and Systems Research, Duke-NUS Medical School, Singapore 169857, Singapore
Ashish Kumar: Program in Health Services and Systems Research, Duke-NUS Medical School, Singapore 169857, Singapore
John Pastor Ansah: Center for Community Health Integration, Case Western Reserve University, Cleveland, OH 44106, USA
Yeuk Fan Ng: Yishun Health, Singapore 768828, Singapore

IJERPH, 2023, vol. 20, issue 5, 1-13

Abstract: For several decades, health systems in developed countries have faced rapidly rising healthcare costs without concomitant improvements in health outcomes. Fee for service (FFS) reimbursement mechanisms (RMs), where health systems are paid based on volume, contribute to this trend. In Singapore, the public health service is trying to curb rising healthcare costs by transitioning from a volume-based RM to a capitated payment for a population within a geographical catchment area. To provide insight into the implications of this transition, we developed a causal loop diagram (CLD) to represent a causal hypothesis of the complex relationship between RM and health system performance. The CLD was developed with input from government policymakers, healthcare institution administrators, and healthcare providers. This work highlights that the causal relationships between government, provider organizations, and physicians involve numerous feedback loops that drive the mix of health services. The CLD clarifies that a FFS RM incentivizes high margin services irrespective of their health benefits. While capitation has the potential to mitigate this reinforcing phenomenon, it is not sufficient to promote service value. This suggests the need to establish robust mechanisms to govern common pool resources while minimizing adverse secondary effects.

Keywords: capitation; casual loop diagram; value-based health; fee for service; health service transformation; health service innovation (search for similar items in EconPapers)
JEL-codes: I I1 I3 Q Q5 (search for similar items in EconPapers)
Date: 2023
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